'What we're finding out from a fiscal standpoint is that the worst is yet to come,' Douglas said.

In a survey conducted last week of 45 of the 50 states, the group found that states have $18.8 billion of budget gaps yet to be closed in fiscal 2010. This comes after they have already imposed measures to eliminate budget imbalances totaling $87 billion in the fiscal year, which for most started last summer.

In the budgets they are drafting for fiscal 2011, states foresee shortfalls of $53.6 billion and for fiscal 2012 $61.6 billion."--------------And there is more of this "lagging indicator" stuff. This one's different, folks. This isn't cyclical. It's structural.

Banks in Calif., Ill., Fla., Texas are shut down - Yahoo! Finance: "WASHINGTON (AP) -- Regulators shut four banks from California to Florida on Friday, boosting to 20 the number of U.S. bank failures this year following the 140 closures last year in the worst financial climate in decades."---------------And the carnage continues.

Does deal with feds encourage foreclosures?: "A bank can make a bigger profit by foreclosing on a homeowner rather than modifying the mortgage, according to two California real estate entrepreneurs. They blame a sweetheart deal that a new bank negotiated with the Federal Deposit Insurance Corporation (FDIC).

The California men produced a video that has now gone viral on the internet, outlining a sweetheart deal for billionaire investors who came together to buy out troubled IndyMac Mortgage Services. The newly formed OneWest Bank haggled with the FDIC to buy out IndyMac's mortgages for 70 cents on the dollar, then convinced the feds to cover nearly all their losses with at least 80 cents on the dollar of the original loan values."--------------------The video link is here.

Friday, February 19, 2010

San Diego Reader | Home Owner Association Horror Stories: "In a way, the whole HOA is a sucker’s game set up by a collusion of developers and local governments. Unpaid HOA boards use HOA assessment fees to pay for what should be the municipality’s responsibility, such basics as roads, electricity, sewage, and water. Developers create high-profit, high-density housing and then hand it over, lock, stock, and all financial and legal responsibilities to these amateur boards not only to run what often amount to million-dollar businesses, but also to keep on paying property taxes to local government for the infrastructure services those authorities didn’t actually have to provide or keep up. No wonder cities love them just as much as developers. No wonder HOA-run condo complexes have mushroomed sixfold, from 7000 in California 20 years ago to about 43,000 today, housing around 10 million, maybe a quarter of the state’s entire population."---------The San Diego Reader's Bill Manson lays down the smack on HOAs. Quite a story. Thanks to Fred Pilot for this link.

It is, after all, perfectly legal for anyone to issue currency, as long as it doesn't look too much like a U.S. dollar. Thus was born the Detroit cheer, a local scrip accepted by a handful of city businesses, including a pizzeria, an electrician and a doggy day care center."------------I think this story ends with people exchanging live pigs for baskets of apples.

Move Over China: Beijing Sells Whopping $34.2 Billion Treasuries In December As Japan Becomes Largest Official Holder Of US Debt | zero hedge: "Gradually we are getting confirmation that Chinese 'posturing' about offloading US debt is all too real. The most recent TIC data confirmed the Treasury's greatest nightmare: China is now dumping US bonds. In December China sold $34.2 billion of debt ($38.8 billion in Bills sold offset by $4.6 billion in Bonds purchased), lowering its total holdings $755.4 billion, the lowest since February 2009, and for the first time in many years relinquishing the top US debt holder spot to Japan, which bought $11.5 billion (mostly in Bonds, selling $1.4 billion Bills) bringing its total to $768.8 billion."------------

'As far as what the bank is going to get, I plan on giving them back what was on this hill exactly (as) it was,' Hoskins said. 'I brought it out of the ground and I plan on putting it back in the ground.'"--------------Hey, fair is fair.

'I've got other things to do quite frankly for my constituents here in Las Vegas who rely on me to do the right thing as a mayor,' explained Mayor Goodman."-------------------No beer and apologies for Mayor Goodman...

Even more alarming, experts say, is that those figures will climb to an unprecedented 200 percent of GDP by 2038 without a dramatic shift in course."---------------The CID revolution was accelerated by measures that cut or capped property taxes. Imagine what kinds of institutional changes are in store for us. These gigantic deficits at all levels of government will force cuts in services that we think today are essential, and tax increases that we think nobody could afford.

States renege on local aid: "“For the last three recession cycles, it’s been common for states to reduce financial support for local governments during the recession, and once they come out of it, they restore most of what they’ve cut,” says Michael Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois-Chicago. This time is different. Now local officials are wondering whether that money will ever come back."------------Wondering? Why are they wondering? The money isn't coming back.

People here are pretty sure the answer will be no."---------------Me, too. I'm pretty sure the answer will be NO in CAPS. On the bright side, though, there are great YouTube videos on how to pitch a tarp-tent and live off fried wood lice. So we do have options to that suburban lifestyle.

School districts have already suffered big budget cuts since the recession began two years ago, but experts say the cash crunch will get a lot worse as states run out of stimulus dollars.

The result in many hard-hit districts: more teacher layoffs, larger class sizes, smaller paychecks, fewer electives and extracurricular activities, and decimated summer school programs.

The situation is particularly ugly in California, where school districts are preparing for mass layoffs and swelling class sizes as the state grapples with another massive budget shortfall."-------------So how does the national economy recover? State and local governments and school districts across the nation are standing on swiss cheese.

Sunday, February 14, 2010

World may not be warming, say scientists - Times Online“The temperature records cannot be relied on as indicators of global change,” said John Christy, professor of atmospheric science at the University of Alabama in Huntsville, a former lead author on the IPCC. ---------------So now the "deniers" include "a former lead author on the IPCC" and another scientist "who was invited by the panel to review its last report." And there are many others as well, who say that the temperature measurements upon which the global warming theory is based "are contaminated with surface effects from industrialization and data quality problems. These add up to a large warming bias."

I guess it is time for the global warming crowd to fire up their sarcasm machine, throw some ridicule bombs, and launch the ad hominem missles. Because, as Al Gore says, the debate is over. Except that it isn't.

Banks face up to $300 billion in losses on loans made for commercial property and development, according to a report released Thursday by the Congressional Oversight Panel."---------Nice to see somebody waking up to this situation. I've been predicting a commercial real estate meltdown, but maybe it will be a slow collapse. Thanks to Fred Pilot for this link.

About Me

I am a professor of political science at the University of Illinois at Chicago, and an adjunct professor at The John Marshall Law School in Chicago. Nothing contained in this blog represents the opinions of UIC or John Marshall, and nothing you see here is legal advice. You can reach me at ecmlaw@gmail.com